What to do in a falling stock market

The stock markets have had some rough days lately. At some point, setbacks like these will become a regular thing and the markets will officially begin the next big correction.

If you’re a buy-and-hold investor, stock market corrections are torture. But they’re also an opportunity to buy stocks. “For buy and hold to truly work you have to do both when markets are falling,” portfolio manager Ben Carlson says in a must-read list called 36 Obvious Investment Truths.

Mr. Carlson’s list is essential reading right now because it will help reinforce good investment habits at an uncertain time for stocks. It’s also a great reality check for investors who overestimate their skills after a long bull run for stocks and may have portfolios that are too risky. I particularly like these deceptively simple reminders:

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There’s no such thing as a perfect portfolio, asset allocation or investment strategy.

No investor is right all the time.

No investment strategy can outperform at all times.

Proper diversification means always having to say you’re sorry about part of your portfolio.

There is no signal known to man that can consistently get you out right before the market falls and get you back in right before it rises again.

A stock market correction, whenever it comes, is a natural part of investing. When it comes, your best move is probably to buy more stocks.

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Ask Rob

Q: “I will convert my RRSP in a couple of years to an RRIF. Right now, the RRSP is invested in stocks and ETFs with a big bank online brokerage. Will I need to get an adviser when I convert to a RRIF, or can I do it online myself?”

A: An adviser makes sense if you want help, but you can do it yourself. In fact, I wrote something of a manual on how to do it.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

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